Hibbett Sports DEF 14A 2006
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant ( X )
Filed by a party other than the Registrant ( )
Check the appropriate box:
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
You are invited to attend the annual meeting of the stockholders of Hibbett Sporting Goods, Inc., which will be held at the principal executive offices of Hibbett Sporting Goods, Inc., 451 Industrial Lane, Birmingham, Alabama 35211, on Wednesday, May 31, 2006, at 10:00 A.M., local time for the following purposes:
Information concerning these and certain other matters concerning the Company are contained in the accompanying Notice of Annual Meeting and Proxy Statement.
It is important that your shares be voted at the annual meeting. Therefore, I urge you to read the accompanying Notice of Annual Meeting and Proxy Statement and sign and return your proxy on the enclosed form. Even if you plan to attend the meeting, please return your signed proxy as soon as possible.
May 1, 2006
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 31, 2006
To the Stockholders of
HIBBETT SPORTING GOODS, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Hibbett Sporting Goods, Inc. will be held at the principal executive offices of Hibbett Sporting Goods, Inc., 451 Industrial Lane, Birmingham, Alabama 35211 on Wednesday, May 31, 2006, at 10:00 A.M., local time for the following purposes:
The Board of Directors has fixed the close of business on April 3, 2006 as the record date for the determination of stockholders who will be entitled to notice of and to vote at the meeting.
Each stockholder is requested to date, sign and return the accompanying proxy in the enclosed return envelope. No postage is needed if mailed in the United States.
May 1, 2006
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HIBBETT SPORTING GOODS, INC.
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TABLE OF CONTENTS
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Hibbetts Board of Directors is soliciting your proxy to vote your shares at the Annual Meeting of Stockholders. This proxy statement summarizes the information you need to know to vote at the meeting.
We began mailing these proxy materials on or about May 1, 2006 to all stockholders entitled to vote. The Hibbett 2006 Annual Report, which includes our consolidated financial statements, is being sent with this proxy statement.
Date, Time and Place of the Meeting
As shown in the Notice of Annual Meeting, the 2006 Annual Meeting of Stockholders of Hibbett Sporting Goods, Inc. will be held at the principal executive offices of Hibbett Sporting Goods, Inc., 451 Industrial Lane, Birmingham, Alabama 35211 on Wednesday, May 31, 2006, at 10:00 A.M., local time.
The telephone number to our principal executive offices is (205) 942-4292.
Voting Your Proxy
Whether or not you plan to attend the Annual Meeting, we urge you to vote. If you vote by proxy, that is, by signing, dating and returning the enclosed proxy card, the individuals named on the card (your proxies) will vote your shares in the manner you indicate. If you do not indicate instructions to your proxies, then your shares will be voted as follows:
If any other matter is presented, then your proxy will vote in accordance with your proxies best judgment. At this time, the Board of Directors is unaware of any other business to be brought before the meeting. If you send more than one proxy card, then your shares will be voted in accordance with the proxy card bearing the latest date. Michael J. Newsome and Gary A. Smith are named as proxies in the enclosed proxy form and have been designated as the directors proxies by the board.
You may revoke your proxy by sending in a signed proxy card with a later date, providing a written notice of revocation to the Corporate Secretary of Hibbett Sporting Goods, Inc. prior to the annual meeting or attending the Annual Meeting to cast your vote in person.
Shares Entitled to Vote
Each stockholder of record at the close of business on the record date, April 3, 2006, is entitled to cast one vote on each proposal presented at the Annual Meeting for each share of our common stock held. As of the record date, there were 35,948,223 shares of our common stock outstanding. There is no cumulative voting of our common stock. Votes will be tabulated by our transfer agent, SunTrust Bank.
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DIRECTORS AND EXECUTIVE OFFICERS
The directors, nominees for directors and executive officers of the Company and their ages as of the date of this Proxy Statement are as follows:
Clyde B. Anderson has been a Director of the Company since 1987. Mr. Anderson has served as the Chairman of the Board of Books-A-Million, Inc., a book retailer, since January 2000 and has been a director of Books-A-Million, Inc. since November 1987. He was named Executive Chairman of the Board of Books-A-Million, Inc. on February 1, 2004. Mr. Anderson served as Chief Executive Officer of Books-A-Million, Inc. from July 1992 to February 2004.
Carl Kirkland has been a Director of the Company since January 1997. Mr. Kirkland is a co-founder of Kirklands, Inc., a leading specialty retailer of decorative home accessories and gift items, and served as Chairman of the Board of Kirklands, Inc. from 1996 to 2004. He now serves as a director and Chairman Emeritus of Kirklands, Inc. Mr. Kirkland served as Chief Executive Officer from 1966 to March 2001 and President from 1966 to November 1997. Mr. Kirkland also serves on the Board of Directors of the Bank of Jackson in Jackson, Tennessee.
Michael J. Newsome served as the President of the Company from 1981 through August 2004 and was named Chief Executive Officer of the Company in September 1999 and Chairman of Board in March 2004. Since joining the Company as an outside salesman over 40 years ago, Mr. Newsome has held numerous positions with the Company, including retail clerk, outside salesman to schools, store manager, district manager, regional manager and President. Prior to joining the Company, Mr. Newsome worked in the sporting goods retail business for six years.
Ralph T. Parks has been a Director of the Company since June 2002. Mr. Parks worked at FOOTACTION USA from 1987 to 1999, where he retired as President and Chief Executive Officer. Parks served two terms as
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Chairman of the National Sporting Goods Association Board of Directors and was inducted into the Sporting Goods Industry Hall of Fame in May 2000. Mr. Parks also serves on the Board of Directors of Kirklands, Inc. and is a member of its audit committee.
Thomas A. Saunders, III, has been a Director of the Company since 1995. Mr. Saunders is a retired member of Saunders Karp & Megrue Partners, LLC which controlled SK Equity Fund, L. P., once a major investor in Hibbett. Before founding Saunders Karp & Megrue in 1990, he served as a managing director of Morgan Stanley & Co. from 1974 to 1989. Mr. Saunders serves on the Board of Directors of Dollar Tree Stores, Inc. at large as well as on their Audit Committee as Chairman and the Nominating Committee. He also serves on the board of several non-public and non-profit companies in various capacities.
Alton E. Yother has been a Director of the Company since August 2004. Mr. Yother has worked as Executive Vice President and Controller of AmSouth Bancorporation since November 2004. Prior to his current position, he worked for over 24 years for SouthTrust Corporation or SouthTrust Bank. His most recent duties at SouthTrust were as Executive Vice President, Treasurer and Controller of SouthTrust Corporation from 1998 to 2004.
Brian N. Priddy has been the President of the Company since August 2005. Prior to joining the Company, Mr. Priddy was the Executive Vice President, Operations, for Bombay, Inc., a furniture retailer, from 1998 to 2005. Prior to that time, Mr. Priddy held various executive management positions with Sears Roebuck & Co., Lillie Rubin, Inc. and Maison Blanche, Inc.
Gary A. Smith has been the Vice President and Chief Financial Officer of the Company since April 2001. Prior to joining the Company, Mr. Smith was the Chief Financial and Accounting Officer for Moore-Handley, Inc. from 2000 to 2001. Mr. Smith was the Director of Finance for City Wholesale, Inc. from 1997 to 2000 and a Senior Vice President of Parisian, Inc. from 1979 to 1997.
Cathy E. Pryor has been with the Company since 1988 and has been the Vice President of Store Operations of the Company since 1995. Prior to 1995, Ms. Pryor held positions as a district manager and Director of Store Operations of the Company.
Jeffry O. Rosenthal has been the Vice President of Merchandising of the Company since August 1998. Prior to joining the Company, Mr. Rosenthal was Vice President and Divisional Merchandise Manager for Apparel with Champs Sports, a division of Foot Locker, Inc. from 1981 to 1998.
Our Board of Directors has a maximum of nine and a minimum of six members. Within this range, the number is set by the Board of Directors. The board currently consists of six directors who are divided into three classes. The term of the Class I director (Mr. Yother) will expire at the close of the Annual Meeting this year. The terms of the Class II directors (Messrs. Kirkland, Newsome and Saunders) will serve until the annual stockholder meeting in 2007. The terms of the Class III directors (Messrs. Anderson and Parks) will serve until the annual stockholder meeting in 2008. Mr. Yother, the Class I director, has been nominated for election at the Annual Meeting, and if elected, he will serve until the annual meeting of stockholders in 2009.
Each non-employee director receives an annual fee of $25,000 (with an additional $5,000 for the Chairman of the Audit Committee) plus $1,000 for each board meeting and each meeting of any committee of the board. The non-employee director serving as the Chairman of a committee, however, receives $1,500 per meeting. In addition, non-employee directors receive awards of nonqualified stock options under the Stock Plan for Outside Directors (the Plan). Each non-employee director is granted an option to purchase 10,000 shares of common stock upon election to the board and, on the last day of each fiscal year, an additional option for 5,000 shares of common stock. The annual grant is pro-rated for directors who have served less than a full fiscal year by the date of grant. Under the 2006 Non-Employee Director Equity Plan, if adopted by the Companys stockholders at the 2006 Annual Meeting, the share limits will increase to a maximum of 15,000 shares upon initial election and 10,000 shares on annual grants. The Board of Directors has the discretion to reduce the actual grants below the stockholder approved maximum amounts.
The Board of Directors has scheduled five regular meetings in the current fiscal year and will hold special
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meetings when Company business requires. During the fiscal year ended January 28, 2006, the Companys Board of Directors held seven meetings. Meetings may be held at a specified location or by teleconference. Each director was present for at least 75% of the regularly scheduled meetings of the board and the meetings held by all committees of the board on which he served during the fiscal year. Mr. Newsome serves as Chairman of the Board.
The board has established a Nominating Committee, an Audit Committee and a Compensation Committee. The memberships and functions of these committees are set forth below. The board has no standing Executive Committee.
Nominating Committee. The Nominating Committee is authorized to exercise oversight with respect to the nomination of candidates for the board in such fashion as determined from time to time by the board. The Nominating Committee met to recommend the election of Mr. Yother as a Class I director at the 2006 Annual Meeting of Stockholders. The members of the Nominating Committee also interviewed Mr. Priddy during fiscal 2006 and recommended that he be hired as President. The members of the Nominating Committee are Mr. Anderson, Chairman of the Committee, and Messrs. Kirkland and Saunders. The Board of Directors has adopted a written charter for the Nominating Committee which is available on our website at www.hibbett.com under Investor Relations.
Audit Committee. The duties of the Audit Committee are to assist the board in fulfilling its oversight responsibilities relating to the integrity of our consolidated financial statements, our compliance with legal and regulatory requirements, our selection and determination of independent registered public accounting firms qualifications and independence and the performance of our independent registered public accounting firm.
The Audit Committee appoints, compensates, retains and oversees the work of the independent registered public accounting firm employed by us to conduct the annual audit examination of our consolidated financial statements. The members meet with the independent registered public accounting firm and financial management to review the scope of the proposed audit for the year, the audit procedures to be utilized, audit fees and at the conclusion of the audit, the audit reports. In addition, the Audit Committee reviews the consolidated financial statements, related footnotes, managements report on internal control over financial reporting and the independent registered public accounting firms reports thereon, and makes related recommendations to the board as the committee deems appropriate.
The members of the Audit Committee are Mr. Yother, Chairman of the Committee, and Messrs. Parks and Saunders. The Audit Committee met nine times during the fiscal year ended January 28, 2006. The Board of Directors has adopted a written charter for the Audit Committee which it periodically reviews. The current version of the charter is available on our website at www.hibbett.com under Investor Relations, and is attached to this proxy statement as Exhibit C.
Our board has reviewed the composition of the Audit Committee and determined that the independence of and the financial literacy of its members meet the listing standards of the NASDAQ Stock Market and regulations of the Securities and Exchange Commission. In addition, our board has determined that Mr. Yother, who chairs the Audit Committee, by virtue of his career experiences serving in financial capacities of publicly traded companies as well as other experiences, qualifies as an audit committee financial expert within the meaning of applicable regulations of the SEC promulgated pursuant to the Sarbanes-Oxley Act of 2002. In addition, the board has determined that Mr. Saunders, who also sits on our Audit Committee, qualifies as an audit committee financial expert because of his financial experience with both private and public companies.
Compensation Committee. The Compensation Committee determines the salaries, bonuses and other compensation to be paid to the Companys officers and administers all plans relating to the compensation of officers. The Compensation Committee also approves the parameters of equity-based compensation for all employees and administers all equity-based plans. The members of the Compensation Committee are Mr. Parks, Chairman of the Committee, and Messrs. Kirkland and Yother. The Compensation Committee met seven times during the fiscal year ended January 28, 2006. The Board of Directors has adopted a written charter for the Compensation Committee which is available on our website at www.hibbett.com under Investor Relations.
The Nominating Committee of our Board of Directors is responsible for identifying, evaluating and recommending to the board all persons to be nominated to serve as a director of the Company. Our board is responsible for nominating the slate of directors for the annual meeting, upon the committee's recommendation.
This year, the director nominee is a current director who is standing for election at the 2006 Annual Meeting of
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Stockholders. No other nominee has been recommended by the Nominating Committee for election.
The Nominating Committee identifies, recruits and recommends to the board only those candidates that the committee believes are qualified to become board members consistent with the criteria for selection of new directors adopted from time to time by the board. We endeavor to have a board representing diverse experience in areas that are relevant to our business. The committee recommends candidates, including those submitted by shareholders, only if the committee believes the candidate's knowledge, experience and expertise would strengthen the board and that the candidate is committed to representing the long-term interests of all stockholders. The Board of Directors has adopted a written charter for the Nominating Committee which is available on our website at www.hibbett.com under Investor Relations.
The committee assesses a candidate's independence, background and experience, as well as the current board skill needs and diversity. With respect to incumbent directors selected for re-election, the committee also assesses each director's contributions, attendance record at board and applicable committee meetings and the suitability of continued service. In addition, individual directors and any person nominated to serve as a director should possess all of the following personal characteristics and be in a position to devote an adequate amount of time to the effective performance of director duties: integrity and accountability, informed judgment, financial literacy, cooperative approach, record of achievement and ability to consult and advise.
The committee will give due consideration to candidates recommended by stockholders. Stockholders may submit such recommendations using the methods described under Communicating with our Board Members on page 9. The committee applies the same criteria to the evaluation of those candidates as the committee applies to other director candidates.
We are committed to principles of good corporate governance and the independence of a majority of our Board of Directors from the management of our Company. As an example of new corporate governance actions, the Company recently adopted equity ownership guidelines for our directors to better align their personal incentives with the performance of the Company. All members of our Audit Committee, our Compensation Committee and our Nominating Committee have been determined by our board to be independent directors within the applicable listing standards of the NASDAQ Stock Market. Our board has reviewed the various relationships between members of our board and the Company and has affirmatively determined that none of our directors or nominees have material relationships with the Company, other than Mr. Newsome who is a member of management. See Certain Relationships and Related Transactions on page 16 for a discussion of relationships between the Company and certain directors.
All committees of our board are comprised solely of independent directors. The basis for such determination by our board is either that the independent director has no business relationship other than his or her service on our board, or that while an independent director may have some involvement with a company or firm with which our Company does business, our board has determined that such involvement is not material and does not violate any part of the definition of independent director under NASDAQ listing standards. Mr. Newsome, our only non-independent director, is not a member of any of our committees.
During meetings of our Board of Directors, the board periodically exercises its right to hold an executive session of non-management members only.
Our board has adopted a code of ethics for all our employees, officers and directors, including our Chief Executive Officer and senior financial officers. A copy of this code may be viewed at our corporate website, www.hibbett.com, under the heading Investor Information. In addition, a printed copy of our code of ethics will be provided to any shareholder upon request submitted to Investor Relations at the Companys address listed elsewhere in this proxy statement.
The charters of our board committees are available on our corporate website, www.hibbett.com, under the heading Investor Information. The charter of the Audit Committee is attached to this proxy statement as Appendix C. In addition, printed copies of any of our board committee charters will be provided to any shareholder upon request submitted to Investor Relations at the Companys address listed elsewhere in this proxy statement.
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Communicating with Our Board Members
Our stockholders may communicate directly with our Board of Directors. You may contact any member (or all members) of our board, any board committee or any chair of any such committee by mail. Any stockholder desiring to communicate to our directors may do so by sending a letter addressed to the person, persons or committee the stockholder wishes to contact, in care of Investor Relations, Hibbett Sporting Goods, Inc., 451 Industrial Lane, Birmingham, Alabama 35211. The letter should state that the sender is a current stockholder. We intend to disclose any future changes to this stockholder communication process on the Investor Information portion of our website located at www.hibbett.com.
All mail received as set forth in the preceding paragraph will be examined by management and/or our general counsel for the purpose of determining whether the contents actually represent messages from stockholders to our directors. We will also examine the mailing from the standpoint of security. Any contents from a stockholder that are not in the nature of advertising, promotions of a product or service or patently offensive material will be forwarded promptly to the addressee.
It is our boards policy that each of our directors should attend the Annual Meeting. All of our directors were in attendance at the 2005 annual meeting of our stockholders.
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information concerning the beneficial ownership of the Companys common stock as of April 3, 2006 by each person (or group within the meaning of Section 13(d)(3) of the Exchange Act) known by the Company to own beneficially more than five percent of the Companys common stock:
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Security Ownership of Management
The following table sets forth certain information concerning the beneficial ownership of the Companys common stock as of April 3, 2006, by (i) each director, (ii) the President, (iii) our executive officers, other than the President (the Named Executive Officers) and (iv) all directors and executive officers as a group:
*Less than one percent
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38308; Ralph T. Parks, 451 Industrial Lane, Birmingham, Alabama 35211; Thomas A. Saunders, III, 667 Madison Ave., New York, New York 10021; Alton E. Yother, 451 Industrial Lane, Birmingham, Alabama 35211; Michael J. Newsome, Brian N. Priddy, Cathy E. Pryor, Jeffry O. Rosenthal and Gary A. Smith, 451 Industrial Lane, Birmingham, AL 35211.
The following table sets forth the compensation earned by the Chief Executive Officer and the Named Executive Officers in the fiscal years ended January 28, 2006, January 29, 2005 and January 31, 2004:
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Option Grants in Last Fiscal Year
The following table sets forth certain information concerning grants of stock options made to the President and the Named Executive Officers during the fiscal year ended January 28, 2006.
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Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
The following table sets forth certain information concerning options exercised during the fiscal year ended January 28, 2006 and unexercised options and fiscal year-end option values for the Chief Executive Officer and the Named Executive Officers.
The Compensation Committee was established by the Board of Directors to oversee the Companys compensation program. The Compensation Committee is comprised of Messrs. Parks, Chairman of the Committee, Kirkland and Yother. The primary function of the Compensation Committee is to take action with respect to salaries, bonuses and equity-based and other compensation paid to the Companys officers and to administer all plans relating to the compensation of such officers, as well as to administer equity-based compensation plans and policies for all employees.
The Companys total compensation structure is comprised of annual base salary, annual cash bonus payments and long term equity-based compensation granted pursuant to the Equity Plans. The Companys overall compensation program has been designed to attract and retain key executives and to provide appropriate incentives to these executives to maximize the Companys long-term financial results for the benefit of the stockholders. A significant portion of the executive compensation package is comprised of equity-based compensation in order to align the interests of management with those of the stockholders. Individual compensation levels are based not only upon the relative success of the Company, but also upon the duties and responsibilities assumed by each officer, individual performance and their attainment of individual and business unit goals.
During fiscal 2006, the Compensation Committee conducted a detailed review and analysis of its compensation plans, agreements and policies. In connection with that review, the Committee hired an outside independent consultant who compared the Companys compensation policies for officers with those of other public companies. Based on the Committees review and analysis, certain changes were implemented.
Base Salary. The salary levels for the Companys executive officers for the fiscal year ended January 28, 2006, including the salary of Mr. Newsome as Chief Executive Officer and Chairman of the Board, are based upon individual performance and responsibility, as well as the salary levels paid by other similarly situated sporting goods and specialty retail companies. Based upon a review of such companies, the base salary levels approved by the Board of Directors are generally lower than the average salary levels of such companies.
Cash Bonuses. The Companys cash bonus program is designed to provide short-term incentive compensation to the Companys officers based upon pre-established performance goals for both the Company and each officer. The Compensation Committee determines the amounts of annual bonus awards for each officer based upon Company and individual performance. For the fiscal year ended January 28, 2006, the Compensation Committee approved the payment of cash bonuses to executive officers of the Company, which bonuses ranged from
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approximately 65% of annual base salary to approximately 89% of annual base salary and were based upon the standards described above, with certain emphasis on individual contribution to the success of the Company during the year and on the performance of those aspects of the Companys business for which each officer has responsibility.
Stock Options. The Equity Plans provide for grants of stock options to the Companys key employees. The payment of equity-based compensation to the Companys officers under the Equity Plans is designed to focus their attention on the enhancement of stockholder value. During fiscal 2006, options to purchase a total of 327,315 shares of the Companys common stock at an average exercise price of $24.05 were granted under the 1996 Stock Option Plan and 2005 Equity Incentive Plan to 153 employees, including a grant of 160,504 options to a total of five executive officers. Options granted under the 1996 Plan and the August 18, 2005 grant under the 2005 Incentive Plan, vest over a five-year period, in equal installments, beginning on the first anniversary of the grant date. All other options granted under the 2005 Incentive Plan vest over a four-year period, in equal installments, beginning on the first anniversary of the grant date.
The awards granted to the Companys officers in fiscal year 2006 represent the Companys desire to align the interests of these individuals with the interests of the Companys stockholders and to provide incentives to these individuals to enhance the Companys growth and success. The size of the awards to individual executive officers was determined by the Compensation Committee based upon a subjective assessment of each officers performance and individual contribution to the Company, his or her position and level of responsibility and other factors.
Other Equity-Based Compensation. With the adoption of the 2005 Equity Incentive Plan, the Company is allowed to grant a variety of awards including stock options, stock appreciation rights, performance units, and restricted and other stock. During fiscal 2006, the Company awarded 29,100 restricted stock units to a total of four executive officers. Restricted stock units granted in fiscal 2006 cliff vest on the fifth anniversary of the date of grant. In conjunction with the implementation of FASB 123-R, the Compensation Committee has increased the percentage of equity-based compensation attributable to restricted stock units. The Committee also provided for accelerated vesting of equity awards previously granted under the Companys employee equity plans in the event of retirement, death or disability. The purpose of this action was to unify the treatment of vesting and forfeiture in all employee equity plans in the event of retirement, death or disability of a participant.
Equity Ownership. The Compensation Committee recently implemented minimum equity ownership guidelines for certain officers to better align their incentives with the success of the Company.
Compensation of the Chief Executive Officer and Chairman of the Board. The Compensation Committee reviews and approves the compensation of Michael J. Newsome, the Companys Chief Executive Officer and Chairman of the Board. For the fiscal year ended January 28, 2006, Mr. Newsome earned compensation comprised of each of the components of the Companys executive compensation program described above. In evaluating the compensation of Mr. Newsome, the Compensation Committee considered not only the salaries of the chief executive officers of comparably sized retail companies with similar sales volume and number of stores, but also the importance of Mr. Newsomes influence on the continued financial growth and success of the Company in the future. The Compensation Committee believes that compensation under the various plans, both for Mr. Newsome and for the other executive officers, brings the total potential compensation to appropriate levels relative to their positions and levels of responsibility.
On March 9, 2005, the Compensation Committee approved a Retention Agreement with Mr. Newsome to secure his continued employment as an advisor to the Company following his future retirement from the duties of Chief Executive Officer. Such retirement is not currently planned but could possibly occur within several years. On March 8, 2006, the Compensation Committee also approved the purchase of a supplemental health insurance policy for Mr. Newsome and his wife.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code generally provides that publicly held companies may not deduct compensation paid to Named Executive Officers to the extent such compensation exceeds $1 million per officer in any year. However, pursuant to regulations issued by the Treasury Department, certain limited exceptions to Section 162(m) apply with respect to qualified performance-based compensation such as stock option grants, annual bonus and performance shares. The Company has taken steps to provide that these exceptions will apply to a majority of the compensation paid to its Named Executive Officers, and the Company will continue to monitor the applicability of Section 162(m) to its ongoing compensation arrangements. In this regard, if the stockholders of the Company approve Proposal No. 3 herein concerning the Bonus Plan, a majority of the bonus compensation paid to such Named Executive Officers under the Bonus Plan are expected to qualify as performance-based compensation and be deductible for federal income tax purposes under Section 162(m). If the stockholders of the Company do not approve the Bonus Plan,
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bonuses paid to such Named Executive Officers will be discretionary and may not be deductible by the Company to the same extent.
The Compensation Committee has the authority to engage the services of outside advisors and during 2006 directly engaged a human resources consulting firm to provide executive compensation benchmarking. The Compensation Committee also concurred in the boards adoption of the 2006 Executive Officer Cash Bonus Plan, in order to give the Company maximum flexibility in compensation to its executive officers. Upon approval by the stockholders, this plan would allow the Company to award such officers with cash incentive bonuses while still protecting the deductibility of the compensation to the Company under the Code.
Submitted by the members of the Compensation Committee of the Company's Board of Directors.
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The Report on Executive Compensation shall not be deemed to be incorporated by reference as a result of any general incorporation by reference of this Proxy Statement or any part hereof in the Companys Annual Report to Stockholders or its Annual Report on Form 10-K.
Options to purchase common stock have been granted to employees and non-employee directors under our stock-based equity plans. The following table summarizes the number of stock options issued, the weighted-average exercise price and the number of securities remaining to be issued under our existing equity compensation plans, including the 1996 Stock Option Plan, the 2005 Equity Incentive Plan, the Employee Stock Purchase Plan, the 2003 Stock Plan for Outside Directors and the Director Deferred Compensation Plan, as of January 28, 2006. At the 2006 Annual Meeting, the stockholders will vote on an equity plan to replace our existing plan for non-employee outside directors. (See pages 21 - 23 for details.)
The Company has entered into a sublease agreement (Sublease Agreement) with Books-A-Million, Inc. (Books-A-Million), a book retailer, whose Chairman of the Board, Clyde B. Anderson, is on the Companys Board of Directors, pursuant to which the Company will sublease certain real estate from Books-A-Million in Florence, Alabama for one of its stores. The term of the Sublease Agreement expires in June 2008. Under the Sublease Agreement, the Company will make annual lease payments to Books-A-Million of approximately $191,000. We believe that the terms of this transaction is comparable to, or more favorable to, the Company than the terms that would have been obtained in an arms length transaction with an unaffiliated party.
Mr. Yother is an Executive Vice President and the principal accounting officer of Amsouth Bank, one of the banks which participates in the Companys credit facility. During fiscal 2006, the Company had no debt outstanding and incurred no interest expense related to its credit facility.
The Board of Directors has determined that neither relationship described above prejudices the independence of these directors and does not violate the definition of independence or other listing standards of the NASDAQ Stock Market. The Company did not have any loans or other extensions of credit outstanding to any of its directors or executive officers during fiscal year 2006.
The Company has an employment agreement with our President, Brian Priddy, dated August 1, 2005, which has been filed as an exhibit to prior filings with the SEC on Form 10-K and Form 10-Q. The agreement provides for the payment of a base salary as well as his eligibility to participate in the Companys annual bonus and equity incentive plans. The agreement also provides a severance clause in the event of termination without cause within the first two years of employment.
There are currently no employment agreements in force between the Company and Ms. Pryor or Messrs. Newsome, Rosenthal or Smith. On March 9, 2005, we entered into a Retention Agreement with Mr. Newsome to secure his continued employment as an advisor to the Company following his future retirement from the duties of Chief Executive Officer. Such retirement is not currently planned but could possibly occur within several years.
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Compensation Committee Interlocks and Insider Participation
No present or former officer of the Company or its subsidiaries serves as a member of the Compensation Committee. During fiscal year 2006, there were no interlocking relationships between any executive officers of the Company and any entity whose directors or executive officers serve on the Companys Board of Directors and/or Compensation Committee.
Section 16(a) of the Exchange Act requires that executive officers and directors of the Company file reports of stock ownership and changes in ownership (Forms 3, 4 and 5) with the Securities and Exchange Commission. Based solely on a review of copies of Forms 3, 4 and 5 for the year ended January 28, 2006, the Company believes that during the period ended January 28, 2006, all filing requirements were complied with by its executive officers and directors, as well as other Section 16 officers, except for the following:
Independent Registered Public Accounting Firm
The firm of KPMG LLP has been selected by the Audit Committee to be the Companys independent auditors for fiscal year 2007. Representatives of KPMG LLP are expected to be present at the Annual Meeting to respond to appropriate questions and will have the opportunity to make a statement if they so desire.
Fees Paid to KPMG LLP
The table below shows the aggregate fees billed by our principal auditors for professional services rendered in connection with the audit of our annual consolidated financial statements set forth in our Annual Report on Form 10-K for the fiscal years ended January 28, 2006 and January 29, 2005, and the review of our quarterly consolidated financial statements set forth in our Quarterly Reports on Form 10-Q for each of our quarters during the two fiscal years then ended, as well as fees paid to our principal accountants for audit-related work:
Audit Fees represent fees for professional services provided in connection with the audit of our consolidated financial statements, including the audit of the internal controls over financial reporting, the review of our quarterly consolidated financial statements and audit services provided in connection with other statutory or regulatory filings.
Audit Related Fees represent fees for assurance and related services that are traditionally performed by the independent auditor including fees related to employee benefit plan audits and special procedures required to meet certain regulatory requirements.
Tax Fees typically include fees in the areas of tax compliance, tax planning and tax consultation. The Company generally does not request such services from the independent auditor.
Other Fees would include consulting services, including services in connection with implementing, operating or supervising the operation of any information system that aggregates source data underlying the consolidated financial statements or generates information that is significant to the Companys consolidated financial statements taken as a
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whole. We did not engage our principal auditors to provide any such professional services.
The Audit Committee has determined that the services rendered by our principal accountants during our most recent fiscal year are compatible with maintaining their independence. Our auditors did not perform any services that were not related to their audit function.
The Audit Committee is directly responsible for determining the compensation of the independent auditors and has established pre-approval policies and procedures for all KPMG LLP work. All audit work performed by KPMG LLP is approved in advance by our Audit Committee, including the amount of fees due and payable to them for such work. In addition, our Audit Committee also approves all non-audit related work performed by KPMG LLP in advance of the commencement of such work. In 2006, all fees paid to KPMG LLP were approved by our Audit Committee in advance of the performance of work by KPMG LLP, and no fees were approved after the services were rendered by our principal accounting firm.
The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
The Audit Committee of the Companys Board of Directors is comprised of independent directors as required by the listing standards of the NASDAQ Stock Market. The Audit Committee operates pursuant to a written charter adopted by the Board of Directors which is available at www.hibbett.com under Investor Relations.
The role of the Audit Committee is to oversee the Companys financial reporting process on behalf of the Board of Directors. Management of the Company has the primary responsibility for the Companys consolidated financial statements as well as the Companys financial reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited consolidated financial statements, managements assessment of the effectiveness of the Companys internal control over financial reporting and the independent registered public accounting firms evaluation of the Companys system of internal control over financial reporting included in the annual report on Form 10-K with management and with the independent registered public accounting firm, who is responsible for expressing an opinion on the conformity of those audited consolidated financial statements with U.S. generally accepted accounting principles, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the consolidated financial statements and such other matters as are required to be discussed by the Statement on Auditing Standards No. 61, Communication with Audit Committee, as amended.
In addition, the Audit Committee has discussed with the independent registered public accounting firm their independence from management and our Company. The Audit Committee received all written disclosures and letters from KPMG LLP required by Independence Standards Boards Standard No. 1 and discussed with KPMG LLP the independence of KPMG LLP. The Audit Committee also considered the compatibility of nonaudit services with the auditors independence.
The Audit Committee discussed with the independent registered public accounting firm the overall scope and plans for their audits and all matters required to be discussed under Statement of Auditing Standard No. 90. The committee met with the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of the Companys internal controls and the overall quality of our financial reporting.
Based on the reports and discussions described above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Companys Annual Report on Form 10-K for the year ended January 28, 2006 for filing with the Securities and Exchange Commission.
Submitted by the members of the Audit Committee of the Companys Board of Directors.
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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG HIBBETT SPORTING GOODS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX AND THE NASDAQ RETAIL TRADE INDEX
The following graph compares the percentage change in the Companys cumulative total stockholder return on its common stock against a cumulative total return of the NASDAQ Composite Index and the NASDAQ Retail Trade Index. The graph below outlines returns for the period beginning on January 31, 2001 to January 28, 2006. The Company has not paid any dividends. Total stockholder return for prior periods is not necessarily an indication of future performance.
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PROPOSAL NUMBER 1
ELECTION OF DIRECTOR
At the 2006 annual meeting of stockholders, the term of our Class I director is expiring. The director is Alton E. Yother. The Board of Directors proposes the election of Mr. Yother at the 2006 annual meeting of stockholders. If so elected, this Class I director will hold office for a three-year term expiring at the annual meeting of stockholders to be held in 2009 and until his successor is elected and qualified. Proxies may not be voted for a greater number of persons than the nominee named herein.
All other directors will continue in office following this annual meeting and their terms will expire in 2007 (Class II) and 2008 (Class III). Officers are appointed by the board.
The nominee has indicated his willingness to serve as director. If a nominee becomes unable to stand for election, the persons named in the proxy will vote for any substitute nominee proposed by the Board of Directors.
A director will be elected, so long as a quorum is present, if he receives the affirmative vote of a majority of the shares of our common stock present, in person or by proxy, at the Annual Meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE FOR THE NOMINEE FOR DIRECTOR.
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PROPOSAL NUMBER 2
APPROVAL TO ADOPT THE 2006 NON-EMPLOYEE DIRECTOR EQUITY PLAN
The Board of Directors (the Board) has adopted, subject to stockholder approval, the Hibbett Sporting Goods, Inc. 2006 Non-Employee Director Equity Plan (NDEP), which is intended to replace our existing 1996 Stock Plan for Outside Directors (Old Plan), under which we currently grant options to non-employee outside directors. The Old Plan has a term of ten years and expires this year.
As a result of the expiration of the Old Plan, the Board has adopted the Non-Employee Director Equity Plan under which 500,000 shares will become available for issuance. As of April 1, 2006, approximately 173,000 shares remain available for issuance under the Old Plan and these shares will be rolled into the NDEP.
The new plan permits us to grant an expanded variety of equity awards including options, stock appreciation rights, restricted stock units, restricted stock and other stock. Like the Old Plan, the NDEPs purpose is to promote our interests and the interests of our stockholders by attracting and retaining qualified and experienced individuals for service as Non-Employee Directors, and to motivate these individuals to exercise their best efforts on the Companys behalf.
ADMINISTRATION. The plan is administered by the Companys Board of Directors (the "Board"). The Board is authorized to, among other things:
STOCK OPTIONS. Options to purchase shares of common stock granted under the NDEP will be non-qualified stock options and subject to a written award agreement. The purchase price of common stock covered by an option may not be less than 100% of the fair market value of the common stock on the date of the option grant. On April 3, 2006, the closing price of the common stock was $32.01 per share. Options may be exercised only at such times as may be specified by the Board in the non-employee directors award agreement. If the option so provides, a director exercising an option may pay the purchase price through cash payments, by the delivery of shares of stock, or by such other methods of exercise as may be approved by the Board from time to time.
STOCK APPRECIATION RIGHTS. The Board may award stock appreciation rights alone or in tandem with stock options, and impose such conditions upon their exercise as it deems appropriate. When the stock appreciation right is exercisable, the holder may surrender all or a portion of his unexercised stock appreciation right and receive in exchange an amount equal to the excess of (i) the fair market value on the date of exercise of the common stock covered by the surrendered portion of the stock appreciation right over (ii) the fair market value of the common stock on the date of grant. The payment may be in cash or shares of stock. The Board may limit the amount that can be received when a stock appreciation right is exercised.
Repricing of options and stock appreciation rights after the date of grant is not permitted.
RESTRICTED STOCK. Restricted stock issued pursuant to the NDEP is subject to the following general restrictions: (i) none of such shares may be sold, transferred, pledged, or otherwise encumbered or disposed of until the restrictions on such shares shall have lapsed or been removed under the provisions of the plan, and (ii) if a holder of restricted stock does not meet the required service period or does not meet other criteria specified in the Award Agreement, such holder will forfeit any shares of restricted stock on which the restrictions have not lapsed or been otherwise removed. The Board establishes as to each share of restricted stock issued under the NDEP the terms and conditions upon which the restrictions on such shares shall lapse. Such terms and conditions may include, without limitation, the lapsing of such restrictions at the end of a specified period of time, or as a result of the disability, death or retirement of the recipient.
STOCK UNITS AND RESTRICTED STOCK UNITS. The Board may award non-employee directors either the right to receive shares in the future or the right to receive restricted stock in the future. Any such awards are subject to conditions, restrictions and contingencies as the Board may determine.
AWARD LIMITS. Subject to adjustments that the Board may make upon future stock splits, share dividends and certain other transactions:
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relating to Restricted Stock and Restricted Stock Units shall be 500,000 shares.
The Board is empowered to set initial and annual awards at amounts less than the maximum levels described above. In April 2006, it was determined that for the fiscal year ending February 3, 2007 and until the Board decides otherwise, Eligible Directors will be granted an option to purchase 10,000 shares upon appointment and receive an annual option to purchase 5,000 shares.
ELIGIBLE DIRECTORS. All Non-Employee Directors selected by the Board are eligible to participate in the plan. As of April 1, 2006, the Company had five (5) Non-Employee Directors.
OTHER TERMS AND CONDITIONS. Generally, awards may only be transferred upon death, but the Board may provide for broader transferability in the award agreement. The Board also has the authority to determine the vesting and expiration of the awards.
SHARES TO BE ISSUED UNDER THE PLAN. The maximum number of shares of our common stock that may be granted as awards under the NDEP is 500,000, plus any shares available for future awards under the Old Plan, which terminates on June 1, 2006. (As of April 1, 2006, there were approximately 173,000 shares issuable under the Old Plan.) The Board may, however, adjust this maximum amount to account for any future stock split, reverse stock split, stock dividend, combination, or reclassification of common stock or any similar transaction effected for which we do not receive any payment. When an award is forfeited or lapses, including awards under the old plan, the shares subject to that award become available for future awards under the new plan. Also, shares tendered in payment for the exercise price or the related withholding obligation will increase the number of shares available for awards under the plan. No awards may be made after June 1, 2016, the tenth anniversary of the effective date of the plan.
CHANGE OF CONTROL. In the event of a change of control of the Company, the Board has discretion to accelerate the vesting or exercisability of any awards and to cash-out any and all outstanding awards, subject to limitations imposed by the Internal Revenue Code. The Board also has the right to substitute or assume awards in connection with mergers, reorganizations, or other transactions.
AMENDMENT. The Board may amend or terminate the NDEP at any time. We must obtain stockholder approval for any change that would require such approval under listing standards of the NASDAQ Stock Market and any regulatory or tax requirement with which the Board desires to comply. However, no rights under an outstanding award may be impaired by such action without the consent of the holder.
Text of the Plan
The preceding summary of the NDEP is qualified in its entirety by reference to the complete text of the plan which is set forth in Appendix A to our proxy statement as filed with the Securities and Exchange Commission. Our filings with the SEC may be found through our corporate website at www.hibbett.com under the heading Investor Relations.
United States Federal Income Tax Consequences Of Awards Under the NDEP
The Federal income tax consequences of participation in the NDEP we are submitting for approval are complex and subject to change. The following discussion, which has been prepared by our counsel, the law firm of Williams Mullen, is only a summary of the general rules applicable to the plan, not a complete description of the Federal income tax aspects. The summary is based on current provisions of the Internal Revenue Code and does not cover any state or local tax consequences of participation in the plan. Participants should consult their own tax advisors since a taxpayer's particular situation could result in some variation of the rules described below.
NON-QUALIFIED OPTIONS. The grant of a non-qualified option ("NQO") will not result in taxable income to the participant. The participant will realize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the shares acquired over the exercise price for those shares, and the Company will be entitled to a corresponding deduction. Gains or losses realized by the participant upon disposition of such shares will
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be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of exercise.
STOCK APPRECIATION RIGHTS. The grant of a SAR will not result in taxable income to the participant. Upon exercise of a SAR, the amount of cash or the fair market value of shares received will be taxable to the participant as ordinary income, and a corresponding deduction will be allowed to the Company. Gains or losses realized by the participant upon disposition of such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of exercise.
RESTRICTED AND OTHER STOCK. A participant who has been granted a restricted stock award will not realize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time, assuming that the restrictions constitute a "substantial risk of forfeiture" for Federal income tax purposes. Upon the vesting of shares subject to an award, the holder will realize ordinary income in an amount equal to the then fair market value of those shares, and the Company will be entitled to a corresponding deduction. Gains or losses realized by the participant upon disposition of such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of vesting.
A participant may elect, pursuant to Section 83(b) of the Internal Revenue Code, to have the income recognized and measured at the date of grant of restricted stock and to have the applicable capital gain holding period commence as of that date. If a Section 83(b) election is made, the Company will be entitled to a corresponding deduction at the time of grant.
A participant who has been granted a stock award that is not subject to a substantial risk of forfeiture for Federal income tax purposes (for example, bonus stock) will realize ordinary income in an amount equal to the fair market value of the shares at such time, and the Company will be entitled to a corresponding deduction.
Benefits to Outside Directors
All of the shares available for issuance under the NDEP will be allocated to non-employee directors. This amount is equal to 500,000 shares of Common Stock, plus any shares available under the Old Plan at the time it terminates. No awards under the NDEP may be made to executive officers or other Company employees.
See "Director Compensation" on page 6 for detailed information on awards to outside directors under the Company's Stock Option Plan for Outside Directors during the most recent fiscal year.
The Non-Employee Director Equity Plan will be adopted, so long as a quorum is present, if it receives the affirmative vote of a majority of the shares of our common stock present, in person or by proxy, at the Annual Meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
APPROVING THE 2006 NON-EMPLOYEE DIRECTOR EQUITY PLAN.
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PROPOSAL NUMBER 3
APPROVAL TO ADOPT THE 2006 EXECUTIVE OFFICER CASH BONUS PLAN
The Board of Directors (the Board) has adopted, subject to stockholder approval, the Hibbett Sporting Goods, Inc. 2006 Executive Officer Cash Bonus Plan (EOCBP). This plan is intended to enhance the Companys ability to attract and retain highly qualified executives by providing additional financial incentives to such executives to promote the success of the Company.
ADOPTION. Subject to the approval of the plan by the stockholders of the Company, the EOCBP shall be effective for the fiscal year of the Company commencing January 29, 2006 and shall continue in effect until the end of the fiscal year of the Company commencing in 2016, unless earlier terminated, as defined.
PURPOSE. The purpose of the EOCBP is to enhance the Companys ability to attract and retain highly qualified executives and to provide additional financial incentives to those executives to promote our Companys success. The EOCBP is also intended to satisfy the requirements for performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code.
PERFORMANCE GOALS. Achievement of goals relating to the following measures, to be set by the Compensation Committee in connection with any particular award, shall be necessary for the payment of bonuses under the EOCBP:
Such goals may be stated in absolute terms, relative to comparison companies or indices, as increases over past time periods, as ratios (such as earnings per share) or as returns on any of the foregoing measures over a period of time.
ADMINISTRATION. The Compensation Committee of the Board of another committee (consisting of at least two directors, each of whom shall be an outside director within the meaning of Section 162(m)) appointed by the Board will administer the EOCBP. In administering the plan, the Committee will have full power and authority to interpret the terms and provisions of the plan and to establish, adjust, pay or decline to pay bonuses under the plan.
ELIGIBLE EXECUTIVES. Participation in the plan will be limited to Eligible Executives, which is defined as the Companys Chief Executive Officer and any other executive officer designated by the Compensation Committee. Currently, there are five executive officers of the Company Michael J. Newsome, Brian N. Priddy, Cathy E. Pryor, Jeffry Rosenthal and Gary A. Smith. No non-employee director of the Company or non-executive officer employee will be entitled to participate in, or otherwise receive benefits under, the plan.
ESTABLISHMENT OF TARGET BONUSES. Within 90 days after the end of each fiscal year, the Compensation Committee will designate those Eligible Executives who are to be participants in the plan for that fiscal year and will specify the terms and conditions for the determination and payment of any Incentive Bonus to each of those participants. The maximum Incentive Bonus that may be payable to any Eligible Executive under the EOCBP for any fiscal year will be $1 million. The Compensation Committee may condition the payment of an Incentive Bonus upon the satisfaction of such objective or subjective standards that the Committee determines to be appropriate. The EOCBP contains special provisions for designating additional Eligible Executives for participation in the plan after such 90-day period and determining the amount of their maximum Incentive Bonuses.
COMMITTEE CERTIFICATION AND DETERMINATION OF INCENTIVE BONUSES. As soon as practicable after the end of each fiscal year, the Compensation Committee will certify in writing whether the stated performance goal has been met and will determine the amount of the Incentive Bonus to be paid to each plan participant. In determining that amount, the Committee will consider the target bonuses established at the beginning of the year, the degree to which the established standards were satisfied and any other objective or subjective factors it deems appropriate and may reduce the amount of, or eliminate altogether, any Incentive Bonus that would otherwise be payable.
PAYMENT OF INCENTIVE BONUSES. Following the Compensation Committees determination of the Incentive Bonuses to be paid, those Incentive Bonuses will be paid in cash (subject to any election made by an Eligible Executive with respect to the deferral of all or a portion of his or her Incentive Bonus or the payment of all or a portion of his or her Incentive Bonus in some form other than cash).
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DURATION AND AMENDMENT. If stockholders approve the EOCBP, it will continue in effect until the end of the Companys fiscal year beginning in 2016. The Board, however, may suspend or terminate the EOCBP at any time. In addition, the Board may amend the Plan from time to time as it deems advisable, except that, without the approval of the Companys stockholders, the Board may not amend the plan to (a) increase the maximum amount of Incentive Bonus that may be paid or otherwise materially increase the benefits accruing to any Eligible Executive under the Plan, (b) materially modify the eligibility requirements for participation in the plan or (c) change the material terms of the stated performance goal.
REASONS FOR THE PROPOSAL. Generally, Section 162(m) of the Internal Revenue Code prevents a company from receiving a federal income tax deduction for compensation paid to a Named Executive Officer in excess of $1 million for any year, unless that compensation is performance-based. One of the requirements of performance-based compensation for purposes of Section 162(m) is that the compensation be paid pursuant to a plan that has been approved by the companys stockholders. The Board believes that it is desirable and in the best interests of the Company and its stockholders that the cash bonuses to be paid to its executive officers be deductible for federal income tax purposes and, accordingly, has structured the EOCBP to satisfy the requirements of Section 162(m) for performance-based compensation. The Board also believes that the plan serves the Companys interests by focusing managements attention on the achievement of those goals that the Board, through the Compensation Committee, determines to be strategically and operationally important for the Company.
If the stockholders do not approve the EOCBP, we expect that any bonuses for fiscal 2007 and subsequent years for executive officers would be discretionary and that such bonuses would not be deductible under Section 162(m) to the extent that (when combined with other non-exempt compensation) they exceed the limit set forth in that section.
Text of the Plan
The preceding summary of the EOCBP is qualified in its entirety by reference to the complete text of the plan which is set forth in Appendix B to our proxy statement as filed with the Securities and Exchange Commission. Our filings with the SEC may be found through our corporate website at www.hibbett.com under the heading Investor Relations.
United States Federal Income Tax Consequences of Awards Under the EOCBP
The Federal income tax consequences of participation in the EOCBP we are submitting for approval are complex and subject to change. The following discussion, which has been prepared by our counsel, the law firm of Williams Mullen, is only a summary of the general rules applicable to the plan, not a complete description of the Federal income tax aspects. The summary is based on current provisions of the Internal Revenue Code and does not cover any state or local tax consequences of participation in the plan. Participants should consult their own tax advisors since a taxpayers particular situation could result in some variation of the rules described below.
A participant in the Executive Officer Cash Bonus Plan will be taxed at ordinary income rates on a cash bonus in the year received. Generally, the Company will receive a federal income tax deduction corresponding to the amount included in the participants income in the same year.
The Companys deductions should not be subject to the limitations of Section 162(m) of the Internal Revenue Code because the intent of the Executive Officer Cash Bonus Plan is to permit grants of performance-based compensation which will not be subject to the limitation on deductibility contained in Section 162(m).
Any acceleration of the vesting or payment of awards under the plan in the event of a change of control of the Company may cause part or all of the consideration involved to be treated as an excess parachute payment under the Internal Revenue Code, which may subject the participant to a 20% excise tax and which may not be deductible by the Company.
Neither the Board nor the Committee nor any Eligible Executive shall take any action (or omit to take any action) that would, in the opinion of the Board, cause the EOCBP to become a nonqualified deferred compensation plan as defined in Section 409A of the Code.
Benefits to Executive Officers
Awards under the Executive Officer Cash Bonus Plan are made at the Compensation Committees discretion and are based on the Companys performance. Accordingly, it is not possible to determine at this time the amount of the awards that will be paid for the current fiscal year, the amount of any awards that would have been paid in any prior fiscal year had the plans then been in effect, or the amount of future awards under the plan. See Executive Compensation on page 11 for detailed information on awards to certain executive officers under the Companys existing incentive plans during the most recent fiscal year.
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The Executive Officer Cash Bonus Plan will be adopted, so long as a quorum is present, if it receives the affirmative vote of a majority of the shares of our common stock present, in person or by proxy, at the Annual Meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
APPROVING THE 2006 NON-EMPLOYEE DIRECTOR EQUITY PLAN.
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PROPOSAL NUMBER 4
APPROVAL TO AMEND THE COMPANYS CERTIFICATE OF INCORPORATION
The Board recommends that the stockholders approve an amendment to Section IV of the Certificate of Incorporation, which will increase from 50,000,000 to 80,000,000 the number of shares of Common Stock that the Company may issue bringing to 81,000,000 the total number of shares of authorized stock. Upon approval by the Companys stockholders, Section IV of the Companys Certificate of Incorporation will be amended by revising the section to read as follows:
The total number of shares of stock which the Corporation shall have authority to issue is 81,000,000, consisting of 80,000,000 shares of Common Stock, par value $.01 per share (the Common Stock), and 1,000,000 shares of Preferred Stock, par value $.01 per share (the Preferred Stock).
The Board of Directors believes that it is in the best interest of the Company and its stockholders to have additional Common Stock authorized that would be available for issuance for general corporate purposes, including declaring stock splits and stock dividends, and raising capital to support business expansion, acquisitions or other developments which might make the issuance of additional Common Stock desirable. If approval of an increase in the Companys authorized Common Stock is postponed until a specific need arises, the delay and expense incident to obtaining approval of the stockholders at that time could impair the Companys ability to meet its objectives. If an increase in the Companys authorized Common Stock is approved, no further action or approval by the stockholders would be necessary prior to the issuance of the additional shares unless applicable laws or regulations or the rules of any stock exchange on which the Companys securities may then be listed required such action or approval. As of April 21, 2006, there were 35,977,257 shares of Common Stock issued and 32,415,357 shares of Common Stock outstanding. In addition, we have granted 5,241,012 awards to purchase our common stock pursuant to our stock-based equity plans and have reserved an additional 1,468,971 shares of common stock for issuance upon the exercise of additional awards that may be granted pursuant to our stock plans.
The holders of any of the additional shares of Common Stock issued in the future would have the same rights and privileges as the holders of the shares of Common Stock currently authorized and outstanding. Those rights do not include preemptive rights with respect to the future issuance of any additional shares.
The amendment authorizing the increase in the authorized shares of Common Stock will amend Section IV of the Companys Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
AMENDING THE COMPANYS CERTIFICATE OF INCORPORATION.
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The Companys Board of Directors knows of no other matters to be brought before the meeting other than as described in this Proxy Statement. However, if any other proper matters are brought before the meeting, the persons named in the enclosed proxy, or in the event no person is named, Michael J. Newsome and Gary A. Smith, will vote in accordance with their best judgment on such matters.
GENERAL INFORMATION ABOUT VOTING
A quorum of stockholders is necessary to hold a valid meeting. If a majority of the outstanding shares of common stock that are entitled to vote are present, in person or by proxy, a quorum will exist. Abstentions and broker non-votes (described below) are counted for establishing a quorum.
On certain routine matters, brokers may, at their discretion, vote shares they hold in street name on behalf of beneficial owners who have not returned voting instructions to the brokers. Routine matters include the election of directors (Proposal 1). In instances where brokers are prohibited from exercising discretionary authority, brokers will not vote the shares of beneficial owners who fail to provide instruction (so-called broker non-votes). These shares are not included in the vote totals and, therefore, have no effect on the vote. At the 2006 annual meeting, we believe brokers will be prohibited from exercising discretionary authority with respect to approving the 2006 Non-Employee Director Equity Plan (Proposal 2) and approving the 2006 Executive Officer Cash Bonus Plan (Proposal 3).
Broker non-votes will not be counted as votes "for" or "against" any proposal and will not affect the outcome with respect to any matter to be voted on. Any abstention or vote withheld will have the same effect as a vote against a nominee or proposal.
If no specification is made on a properly executed proxy form, the proxies will vote for the election of the nominee for Director (Proposal 1) and in favor of the approval of the 2006 Non-Employee Director Equity Plan (Proposal 2), approval of the 2006 Executive Officer Cash Bonus Plan (Proposal 3) and approval of the Amendment to the Companys Articles of Incorporation (Proposal 4).
SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2007 ANNUAL
MEETING OF STOCKHOLDERS
In accordance with Rule 14a-8 of the Securities and Exchange Commission, we are not required to include any proposal by a stockholder in the proxy statement and proxy form for the 2007 annual meeting of stockholders unless we receive the proposal at our executive offices, 451 Industrial Lane, Birmingham, Alabama 35211, on or before January 11, 2007. If a stockholder desires to bring before the companys 2007 annual meeting of stockholders a proposal that is not submitted for inclusion in our proxy statement in accordance with Rule 14a-8, notice of the proposal must be received by the Company at least 45 days before the one-year anniversary of the date of mailing of this Proxy Statement in order for such notice to be considered timely for purposes of SEC Rule 14a-4(c). We expect to mail this Proxy Statement beginning on or about May 1, 2006, in which case we would have to receive such notice by March 10, 2007 for it to be considered timely under Rule 14a-4(c). The proxies we solicit for next years annual meeting may confer discretionary authority to vote on any stockholder proposals that were not submitted in a timely manner, and no description of such proposals will be included in the proxy statement for that meeting.
SOLICITATION OF PROXIES
The company will bear cost of this solicitation of proxies. In addition to solicitation by mail, our directors, officers and other employees may solicit proxies personally or by telephone or other means of communication. We will request certain banking institutions, brokerage firms, custodians, trustees, nominees and fiduciaries to forward solicitation material to the beneficial owners of shares of the company held of record by such persons, and we will reimburse reasonable forwarding expenses.
In some cases, only one proxy statement is being delivered to multiple stockholders sharing an address unless the company has received contrary instructions from one or more of the stockholders. Upon written or oral request, we will deliver a separate copy of the proxy statement to a stockholder at a shared address to which a single copy of the proxy statement was delivered. A stockholder can notify the companys Investor Relations department at the above address that he or she wishes to receive a separate copy of the proxy statement in the future, or alternatively, that he or she wishes to receive a single copy of the materials instead of multiple copies.
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ANNUAL REPORT AND 10-K REPORT
This Proxy Statement is being mailed together with our Annual Report on Form 10-K to stockholders for the fiscal year ended January 28, 2006, as filed with the Securities and Exchange Commission. The exhibits to the Form 10-K will be furnished upon request and payment of the cost of reproduction. Such written request should be directed to Investor Relations, 451 Industrial Lane, Birmingham, Alabama 35211. Our SEC filings are also available on our website at www.hibbett.com under the heading Investor Information.
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Vote 24 hours a day, 7 days a week!
If you vote by telephone or over the Internet, do not mail your proxy card.
Proxy card must be signed and dated below.
Please fold and detach card at perforation before mailing.
HIBBETT SPORTING GOODS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 31, 2006.
The undersigned hereby constitutes and appoints Michael J. Newsome and Gary A. Smith, or either of them, with full power of substitution in each, proxies to vote all shares of Common Stock of Hibbett Sporting Goods, Inc. which the undersigned may be entitled to vote at the Annual Meeting of Stockholders to be held at the principal executive offices of Hibbett Sporting Goods, Inc., 451 Industrial Lane, Birmingham, Alabama 35211, on Wednesday, May 31, 2006, and at all adjournments thereof, as indicated on the reverse.
PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
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Proxy card must be signed and dated on the reverse side.
Please fold and detach card at perforation before mailing.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN AND AUTHORIZES THE PROXIES TO TAKE ACTION IN THEIR DISCRETION UPON OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
IF NO PREFERENCE IS INDICATED, THIS PROXY WILL BE VOTED FOR THE NOMINEE AND FOR PROPOSALS #2, #3 AND #4.
1. Election of Class I Director, Nominee:
2. To adopt the Hibbett Sporting Goods, Inc.s 2006 Non-Employee Director Equity Plan as more fully set out under Proposal No. 2.
3. To adopt the Hibbett Sporting Goods, Inc.s 2006 Executive Officer Cash Bonus Plan as more fully set out under Proposal No. 3.
4. To adopt an amendment to Hibbett Sporting Goods, Inc.s Articles of Incorporation as more fully set out under Proposal No. 4.
(CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE)
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HIBBETT SPORTING GOODS, INC.
2006 NON-EMPLOYEE DIRECTOR EQUITY PLAN
1. Purpose of the Plan
The purpose of the Plan is to promote the interests of the Company by attracting and retaining qualified and experienced individuals for service as Non-Employee Directors, and to motivate these individuals to exercise their best efforts on the Companys behalf.
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All Non-Employee Directors are eligible to receive grants of Awards under the Plan.
4. Administration and Implementation of Plan
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regulations as it shall, from time to time, deem advisable. The Board may amend any outstanding Awards without the consent of the Holder to the extent it deems appropriate; provided however, that in the case of amendments adverse to the Holder, the Board must obtain the Holders consent to any such amendment, except that such consent shall not be required if, as determined by the Board in its sole discretion, such amendment is required to either (a) comply with Section 409A of the Code or (b) prevent the Holder from being subject to any excise tax or penalty under Section 409A of the Code.
5. Shares of Stock Subject to the Plan
Options give a Non-Employee Director the right to purchase a specified number of shares of Common Stock from the Company for a specified time period at a fixed price. Options granted under the Plan will be Non-Qualified Stock Options and shall be subject to the following terms and conditions:
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7. Stock Appreciation Rights
Stock Appreciation Rights give a Non-Employee Director the right to receive, with respect to each share of Common Stock encompassed by the exercise of such SAR, the excess, if any, of the Fair Market Value at the time of exercise over the SARs Initial Value. SARs granted under the Plan shall be subject to the following terms and conditions.
8. Restricted Stock
An Award of Restricted Stock is a grant by the Company of a specified number of shares of Common Stock to a Non-Employee Director, which shares may be subject to forfeiture during a Restriction Period upon the happening of events or other conditions as specified in the Award Agreement. Such an Award of Restricted Stock shall be subject to the following terms and conditions:
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9. Restricted Stock Units
An Award of Restricted Stock Units is a grant by the Company of a specified number of shares of Common Stock to a Non-Employee Director, which, upon lapse of a Restriction Period as specified in the applicable Award Agreement, shall entitle the Holder to a share of Common Stock to the following terms and conditions:
10. Changes in Capitalization; Changes of Control; Settlement of Awards
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Awards. Action by the Board may include: (a) adjustment of the number and kind of shares which may be delivered under the Plan; (b) adjustment of the number and kind of shares subject to outstanding Awards; (c) adjustment of the Exercise Price of outstanding Options; and (d) any other adjustments that the Board determines to be equitable provided, however, that an adjustment of any outstanding Option or SAR must satisfy the requirements of Code section 409A.
The application of the foregoing provisions, including, without limitation, the issuance of any substitute Awards, shall be determined in good faith by the Board in its sole discretion.
11. Effective Date, Termination and Amendment
The Plan, when it has been approved by the shareholders of the Company, shall become effective on June 1, 2006. The Plan shall remain in full force and effect until the earlier of June 1, 2016, or the date it is terminated by the Board. The Board shall have the power to amend, suspend or terminate the Plan at any time. Termination of the Plan pursuant to this Section 10 shall not affect Awards outstanding under the Plan at the time of termination. Amendments to this Plan shall be subject to shareholder approval to the extent such approval is required by applicable law or applicable requirements of any securities exchange or similar entity.
Except as otherwise permitted by the Board,
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13. General Provisions
END OF APPENDIX A
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HIBBETT SPORTING GOODS, INC.
2006 EXECUTIVE OFFICER CASH BONUS PLAN
Hibbett Sporting Goods, Inc., a Delaware corporation (the Company) adopts this 2006 Executive Officer Cash Bonus Plan (the Plan) for the purpose of enhancing the Companys ability to attract and retain highly qualified executives and to provide additional financial incentives to such executives to promote the success of the Company and its subsidiaries.
Remuneration payable under the Plan is intended to constitute qualified performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, and Section 1.162-27 of the Treasury Regulations promulgated thereunder, and the Plan shall be construed consistently with such intention. This Plan is in addition to other compensatory arrangements or plans established for highly qualified executives by the Compensation Committee.
Section 1. Definitions. As used herein, the following terms shall have the respective meanings indicated:
Section 2. Administration of the Plan. The Plan shall be administered by the Committee, which shall have full power and authority to construe, interpret and administer the Plan and shall have the exclusive right to establish, adjust, pay or decline to pay the Incentive Bonus for each Eligible Executive. Such power and authority shall include the right to exercise discretion to reduce by any amount the Incentive Bonus payable to any Eligible Executive; provided, however, that the exercise of such discretion with respect to any Eligible Executive shall not have the effect of increasing the Incentive Bonus that is payable to any other Eligible Executive.
Section 3. Eligibility. Eligibility under this Plan is limited to Eligible Executives designated by the Committee in its sole and absolute discretion.
Section 4. Awards.
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Section 5. Committee Certification. As soon as reasonably practicable after the end of each fiscal year of the Company, the Committee shall determine whether the stated performance goal has been achieved and the amount of the Incentive Bonus to be paid to each Eligible Executive for such fiscal year and shall certify such determinations in writing.
Section 6. Payment of Incentive Bonuses. Subject to any election duly and validly made by an Eligible Executive with respect to the deferral of all or a portion of his or her Incentive Bonus, Incentive Bonuses shall be paid in cash at such times and on such terms as are determined by the Committee in its sole and absolute discretion.
Section 7. No Right to Bonus or Continued Employment. Neither the establishment of the Plan, the provision for or payment of any amounts hereunder nor any action of the Company, the Board or the Committee with respect to the Plan shall be held or construed to confer upon any person (a) any legal right to receive, or any interest in, an Incentive Bonus or any other benefit under the Plan or (b) any legal right to continue to serve as an officer or employee of the Company or any subsidiary or affiliate of the Company. The Company expressly reserves any and all rights to discharge any Eligible Executive without incurring liability to any person under the Plan or otherwise. Notwithstanding any other provision hereof and notwithstanding the fact that the stated performance goal has been achieved or the individual Incentive Bonus amounts have been determined, the Company shall have no obligation to pay any Incentive Bonus hereunder unless the Committee otherwise expressly provides by written contract or other written commitment.
Section 8. Withholding. The Company shall have the right to withhold, or require an Eligible Executive to remit to the Company, an amount sufficient to satisfy any applicable federal, state, local or foreign withholding tax requirements imposed with respect to the payment of any Incentive Bonus.
Section 9. Nontransferability. Except as expressly provided by the Committee, the rights and benefits under the Plan are personal to an Eligible Executive and shall not be subject to any voluntary or involuntary alienation, assignment, pledge, transfer or other disposition.
Section 10. Unfunded Plan. The Company shall have no obligation to reserve or otherwise fund in advance any amounts that are or may in the future become payable under the Plan. Any funds that the Company, acting in its sole and absolute discretion, determines to reserve for future payments under the Plan may be commingled with other funds of the Company and need not in any way be segregated from other assets or funds held by the Company. An Eligible Executives rights to payment under the Plan shall be limited to those of a general creditor of the Company.
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all Incentive Bonuses awarded under the Plan on or after January 29, 2006 shall be fully effective as if the stockholders had approved the Plan on or before January 29, 2006.
Section 12. Application of Code Section 409A. Notwithstanding anything in this Plan to the contrary, neither the Board nor the Committee nor any Eligible Executive shall take any action (or omit to take an action) that would, in the opinion of the Board, cause this Plan to become a nonqualified deferred compensation plan as defined in Section 409A of the Code.
Section 13. Governing Law. The validity, interpretation and effect of the Plan, and the rights of all persons hereunder, shall be governed by and determined in accordance with the laws of the State of Delaware, other than the choice of law rules thereof.
END OF APPENDIX B
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AUDIT COMMITTEE CHARTER
The purpose of the Hibbett Sporting Goods, Inc. Audit Committee (the Committee) is to assist the Board of Directors (the Board) in fulfilling its oversight responsibilities for 1) the financial reporting process and the system of internal control, 2) the independent auditors qualifications and independence, 3) the performance of the Companys internal audit function and independent auditors, and 4) the Companys compliance with legal and regulatory requirements. In connection therewith, the Committee will make regular and timely reports to the Board of the results of its review process as outlined below. The Committee shall foster an environment which encourages open lines of communication and effective working relationships with the Board, management, and independent auditors.
The Committee will be comprised of at least three members. Committee members will be appointed by the Board, and the Chairman will be elected by the Committee. All members will be both independent and financially literate. At least on member of the Committee shall meet the definition of audit committee financial expert as defined by applicable legislation and regulation. Each member should be able to adequately perform the Committees Roles and Responsibilities as outlined below and be knowledgeable of the Companys business and related risks therein. Committee members may participate in Committee meetings in person or via telephone.
The Committee shall meet as frequently as circumstances dictate, but no less than four times annually. Relevant materials/information and a meeting agenda will be provided in advance to members. The Committee will hold private meetings with auditors and executive sessions. Meeting minutes will be prepared.
The Audit Committee is responsible for:
To fulfill its responsibilities and duties, the Audit Committee shall:
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analysis, and recommend to the Board whether the audited financial statements should be included in the Companys Form 10-K;
3. Compliance with Laws and Regulations
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END OF APPENDIX C
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